GBP Could Fall Due To Weak UK Employment And Uncertainty Ahead Of Fed Decision

GBP/USD fell from 1.2740 on weak UK employment data and a strong dollar.

The Bank of England may have difficulty shifting to policy normalization as steady wage growth in the UK offsets weak employment levels.

Investors believe that the Fed advocates maintaining a restrictive framework for longer.

The British pound (GBP) retreated after facing selling pressure around 1.2740 during London trading on Tuesday. GBP/USD weakened on poor UK employment data for the three months to April and expectations that the Federal Reserve will delay rate cuts, as well as a stronger US dollar.

The UK Office for National Statistics (ONS) reported that the labor market contracted for the fourth consecutive time. In the three months to April, the number of employed people fell by 140,000, which was lower than the 177,000 decline in January-March. The ILO unemployment rate rose to 4.4%, higher than the expected 4.3%, the highest level in more than two years. The labor market data showed that businesses are struggling to withstand the consequences of the Bank of England (BoE)’s (BoE) interest rate hike.

Meanwhile, wage growth remained stable between February and April. Average earnings excluding bonuses, a measure of wage inflation, rose in line with expectations and the previously published 6.0%. In addition, average earnings including bonuses rose solidly by 5.9%, above expectations for 5.7%. High wage growth could hamper the Bank of England’s move to lower interest rates.

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